RICHMOND, Ind.– State and local governments are evaluating whether they can recover thousands of tax dollars credited to a local companyafter the business said it would ceaseoperations in 2018.
Janesville Acoustics, 3031 Industries Road, said in a Dec. 14 letter to the state itwill close its facility in August, leading to the elimination of 67 jobs at the automotive insulation plant.
The closure has sparked conversation among area leaders about the status of their incentive programs and what can be done to protect taxpayers and municipalities from having to pay a long-term price for a company's decision to leave.
Janesville, through its parent company Jason Industries,was awardednearly $9 million in 2015 and 2016 by local and state agencies. The money, much of which came in the form of tax abatements, resulted fromthepromise of a hefty investment in the Richmond area that would create up to 87 jobs.
The company, which invested about $10.8 million in the project, never reached its projected level of employment at the plant.
The Palladium-Item this weekobtained documentation from the City of Richmond, the Economic Development Corp. of Wayne County and the Indiana Economic Development Corp.outlining incentives provided to Janesville to locate themanufacturing facility in Richmond.
The county and state have already paid or credited the company more than $250,000 since the incentives deal was finalized.
Here's what was found during the newspaper's analysis of the documents:
Richmond Common Council in 2015 approved two abatements; one was$7.797million in deductions for equipment that would be used for manufacturing purposes at the Richmond facility,another was $200,000 for information technology equipment. The first was a10-year abatement, while the second was for five years.
Abatements are applied to property tax rolls, rather than given directly or credited. This meansthe city did not have to disperse any money from its existing funds.Abatements operate on a sliding scale, with the amount of property tax owed by the company increasing gradually year-over-year.
Neither the Wayne County auditor's or assessor's office had information for how much has so far been abated for the company. The Palladium-Item has requested that information from the city of Richmond, but as of Tuesday afternoon had not received the information.
City documentation for abatement applications (including for Janesville) did not at the time of the agreement — and still does not — contain a clause or verbiage allowing the city to collect the abated portion of the taxes from a company if it closes its doors.
Other cities and counties around the state have in recent years added such language to their documentation allowing them to claim uncollectedtaxes.
Council member Bruce Wissel, who chairs the abatements committee, said during a public meeting Monday night that the city, given the circ*mstances, might be in a position to reevaluate its current procedures for tax abatements.
"It's been five years since we've done this, so yes, it may be an appropriate time to look at those procedures and see if changes need to be made," he said, responding to a question from council member Jamie Lopeman about whether a reevaluation may be necessary.
Wissel said the council last explored adding clawbacks, a way for a governmentto gather taxes abatedtocompanies, in 2012, but ultimately chose not to pursue the revision for a few reasons.
First, he said, if abatements are removed or cancelled, they can never be reapplied to the same property. Keepingabatements on property could also incentivize a company to bring it back into use more quickly, he said, adding that the maneuvers allow property to remainon the tax rolls, albeitat a reduced rate, while it being moved to anotherlocation would remove its tax contributionaltogether from local coffers.
Wissel said the city will be able to make a final determination in 2019 — when it hears about compliance for the company's 2018 tax year— about whether futureproperty abatements can be taken away from Janesville and Jason Industries.
He said the city can not make that determination in 2017 or 2018 because the company's next meeting with the city is to discuss onlythe 2017 tax year, during which they are believed to have been in full compliance.
Wissel said if the closure isnot the result of an economic downturn, the city would likely be able to rescind abatements, but he did not saywhether he thought thecity would be able to recover taxes already abated on the equipment.
"Thiswas a business that tried something and it didn't work. They actually lost a lot more than we did," he said. "We didn't get as much as we had hoped for ... but they (Janesville) took a gamble and lost completely on it."
Outgoing council President Misty Hollis said it might be worth having a work session with Wayne County leadershipto walk through the current abatement process and determine whether changes need to be made.
"I would think as we move forward ... that's going to be one of our priorities," she said.
Hollis said she thought such ameeting should be heldas soon as possible, in early 2018.
The EDC of Wayne County approveda $290,000 Economic Development Income Tax (EDIT) grantin August 2015. The Wayne County Council, which has final say over appropriation of funds,also approved the grant.
The county transferred the funds in their entirety to Janesville on Jan. 27, 2016, according to a ledger of EDIT fund account activity obtained through a public records request by the Pal-Item.
Unlike Richmond, the EDC's application for companiesrequest funding or incentives does contain a provision allowing it to clawback fundsunder certain circ*mstances.
"(We) further acknowledge that the EDC board reserves the right to recover EDIT funds in the event of misrepresentation of the benefits; an unauthorized change in use of the funds; and failure to meet agreed upon investment and payroll figures," the document reads, with an areafor the company to sign below, indicating it agrees to the conditions.
It also contains similar language in a more incentive agreement, signed Dec. 4, 2015 by EDCand company representatives. One particular clause in the document states that if the company does not create 87 new full-time positions or does not invest $12 million — the amount the company said it would put into the plant on its application — by the end of 2017, the EDC would consider "recapturing a prorated share of the ... grant."
"If the EDC should desire to capture some portion of the ... grant, company's current business circ*mstances will be considered in determining the exact amount to recapture," the agreement states.
The EDC's executive committee is expected to meet Jan. 4 to discuss the matter, group president Valerie Shaffer said Sunday.
The Indiana Economic Development Corp. promised up to $450,000 in credits and up to $40,000 in covered training costs in deals finalized inDecember 2015 and March 2016, respectively.
Through early December, the IEDC haspaid nearly $65,000 to the company — $35,075 in tax credits and $29,900 in training grants.
Abby Gras, communications director for the IEDC, said in an email the incentives provided by the corporation are performance-based, and can be revoked if the company does not meet the commitments it makes to the state. She said the state is in talks with Janesville to determine whether money will have to be returned upon the plant's closure.
"IEDC’s compliance team is working with the company to gather more details about its plans and the impact it would have on its existing contracts," she said. "If the company closes its operations, the IEDC would seek to recapture incentives certified and paid to the company under these contracts."
This story will be updated.
Mickey Shuey is the business reporter at the Palladium-Item. Contact him at (765) 973-4472 ormshuey@gannett.com. You can also follow him on Twitter:@MickeyShuey, or on Facebook:www.facebook.com/MickeyShuey.
